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  • techstrategy techstrategy Mar 5, 2013 2:35 PM Flag

    FBI and SEC team up...

    Article on ZH. They should have an absolute field day here. I certainly have documented some highly suspicious/irregular activity for them... They are catching on to the float jam scam enabled by market structure and executed by the quants here...

    There is a reason the NY Fed works with HFT-giant Citadel: it is precisely to facilitate what HFT is "accused" of doing. But one can't go and expose all the manipulated secrets that have sent this fake market to even faker all time highs.

    Authorities are exploring potential holes in the system, including new algorithms referred to as “news aggregation” which search the internet, news sites and social media for selected keywords, and fire off orders in milliseconds. The trades are so quick, often before the information is widely disseminated, that authorities are debating whether they violate insider trading rules, the people familiar with the matter said.

    Authorities are also monitoring alpha capture systems, platforms where sell-side firms share information with buyside professionals, for potential front running or insider trading. Also on their radar is artificial intelligence trading, an algorithm that predicts market reactions based on history.
    One can see it already: "it was all Twitter's fault.""Nonetheless, there is at least a trace reason to be hopeful:

    One government official said market structure could be the next big area for cases, although it was not clear whether any of the strategies violated criminal laws. To prove a criminal case the FBI would need to show that the trader intended to manipulate the stock, which could prove more difficult for strategies that are triggered by computers.

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